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Does Google Actually Have a Plan for Motorola's Cable Business?

8/15/2011 5:13 PM

Google was primarily looking to get its hands on Motorola Mobility’s 17,000-strong patent portfolio with the $12.5 billion takeover bid (see Goog-Moto: The Patent Angle and Google To Acquire Motorola Mobility For $12.5 Billion In Cash).

Which raises a question: Does Google have any strategy for what it’s going to do with the cable-focused Home business?

Answer: maybe not.

“They did it for the wireless side — and they got the cable side along with it,” IBB Consulting managing partner Imran Shah said.

According to an executive with ties to the cable industry, Google CEO Larry Page was obsessed with resolving the company’s deficiency on the patent front — after a consortium including Apple, Microsoft and RIM teamed up to buy Nortel’s 6,000 patents for $4.5 billion. Page mandated seven-day workweeks by senior Google execs until they came up with a solution, according to this exec.

That means the Google-Motorola Mobility deal likely came together in just a few weeks, without time to develop any strategic integration plans.

In other words: What, exactly, Google is going to do with the set-tops, DVRs, gateways, cable modems, transcoders, etc., appears to have been an afterthought.

In any case, the deal has shifted dynamics in the industry quite significantly: “Comcast overnight has become a huge customer of Google, and Comcast has no way out of that in the short run,” the executive said.

Meanwhile, the proposed takeover raised the concern of the American Cable Association, which doesn’t want Google to abuse its market position (see ACA To Google: Don’t Strong-Arm Small Ops With Motorola Deal). NCTA declined to comment, noting it does not typically comment on M&A activity.

IBB’s Shah argued that Google has a real opportunity now “to come in and unlock innovation on the set-top side.”

“The timing is good,” he said. “There’s an underserved need… Google has TV aspirations — they now have access to 65% of U.S. MSO homes through this acquisition.”

That said, Google could certainly decide to divest the Home unit. “That could be cleanly separated and spun off,” Shah acknowledged.

On the mobile side, analysts saw the deal as driven by Google’s need to compete with Apple. “Google sees the need to arm itself with its own in-house device brand to compete effectively with Apple and create an iconic device line like the iPhone,” SNL Kagan senior analyst Sharon Armbrust said.

The tricky part here is that Google will potentially alienate Android licensees, now that it’s directly competing with them. “They’re trying to be both Google and Apple at the same time,” Shah said. “Playing both roles is something that has its challenges, absolutely.”

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